If you’re looking for seed capital, Omer Hazer from First Cut Ventures offers a quick overview of the key points you need to cover when pitching for investment.
If you’re like most founders, chances are that you have either bootstrapped your way so far or you have used what little money you could raise through what are known in investor terms, as the “3 F’s” – friends, family and founders. (Sometimes also known cheekily as friends, family and fools!)
Now however, you’ve decided that it is time to raise capital to support the next stage of your company journey.
Before you venture out and start pitching your company to investors here are the basics that you have to cover if you want an investor to take you seriously.
1. What is the problem?
Before you even think about describing your product and how it is going to revolutionize the world, address the problem you’re solving. Many founders are often blinded by their product and how awesome it is that they forget to communicate the reason they exist.
You should always lead your slide deck or verbal pitch with a short intro followed by the problem that exists.
2. How are you going to solve it?
Now that you’ve described the problem, it is time to explain to the investors what your solution is and how it solves the problem. This is not the time to waffle on about your product. Ensure that you describe your solution in one or two sentences and you use clear, easy to understand language.
“A web platform where users can rent out their space to host travellers” was all AirBnB used in their “Solution” slide. If AirBnB can do it, you can too.
3. What is the existing market doing and what is the size of it?
Once you have communicated the problem you’re trying to solve and the way(s) your company will solve them, it is time to show investors why they should care.
If you have an amazing solution to a big problem but the total market is too small, this will put a very low ceiling for growth and surprise surprise, investors don’t like low ceilings. Do your research and see how the current market is already solving their problem and how big the market really is.
4. Now you can talk about your product
Now that you have laid the foundation of your pitch, you can proceed to talk about your product. As a founder, you will most likely know your product better than your own name. The problem many founders face when pitching isn’t that they say too little about their product but that they say too much and information gets lost.
Talk about the core functionality of your product and don’t get too technical. If an investor has any further questions, they will ask them after your pitch.
5. How will you generate revenue?
At the end of the day, you’re a business and you have to make profit. Ensure you know your revenue streams and communicate them clearly to the investor(s).
6. How will you enter the market?
It doesn’t matter if you have created a revolutionary product if no one knows about it.
Ensure that you briefly talk about your market adoption strategies. Do you have any compelling or unique ways to get users? Make sure to outline these strategies.
7. Who are your competitors and why are you better?
The fact is, 90% of the time you will not be creating a brand new “idea”. You will be entering an existing market with existing companies. Make sure that you know who your competitors are and explain your competitive advantages against the existing players.
8. How much do you want and what will the money be spent on?
Last but not least, don’t expect investors to throw money at you. Walk into the pitch with a goal in mind. How much are you needing to raise? What percentage of your company are you willing to give away and what will the funds be used for?
It is crucial to be able to explain the need for the funds, so do your research and come up with accurate estimates.